Mitch Finnen
September 01 2026
At EW&L, we allocate capital in an institutional manner for wealthy families. The approach is designed as an all-weather wealthsolution that encompasses a range of different risk appetites. I do this as part of a talented team. If you’re in Australia, New Zealand, or Singapore, I’d love to connect to discuss further.
Please note: This article is for informational purposesonly, is not financial advice, and is not an inducement to purchase any digitalasset, cryptocurrency, or any financial security. Always seek advice before making a material financial decision.
As part of our allocations for the last 5 years, we have included bitcoin as a sub-satellite exposure (between 0.5% and 1.5%) across many of our portfolios. Around half of our portfolio allocations include bitcoin.
This has led to varied conversations around the merits of bitcoin. Observably, the range goes from those who rule it out because they understand the mechanism and don’t believe in it, to those who are happy to buy and hold it as a matter of mathematics, where the upside case could be 3-10x over a decade and the downside case is only 1x capital. Rightly, those who have some risk budget left and the appropriate appetite for volatility see this as a balance of outcomes that favours them, and not the house.
What am I buying when I buy bitcoin?
In Australia, we are used to a centralized monetary system,where our currency is linked to a central bank who has the ability to create and destroy money in our system through the purchase or sale of government bonds. Commercial and retail banks are also deputized to push money into our economy via the credit system. This commonly occurs via residential mortgages,credit cards, and commercial property loans. Security is taken over a building, a valuation assigned, and some valuation is then pushed into the system as ‘credit’. Centralized money systems also have an element of trust, especially since the creation of fractional reserve banking. The creation of fractional reserve banking allowed banks to operate more efficiently on a commercial basis by allowing them to only keep a portion of deposits on hand in accessible cash.When a bank appears to be in trouble, this loss of trust causes a ‘run’ on the bank, where depositors scramble to withdraw their funds and in doing so, fold the bank, and cause a banking failure.
Don’t get me wrong – fractional reserve banking makes sense, and is critical to many functions we take for granted each day. This is not intended to criticize the banking model, but to point out that is has flaws that arise more commonly than you expect.
Bitcoin, at its simplest, is a decentralized monetary system. The money within the system cannot be destroyed (unless it is lost, which approx. 11-20% of the total supply cap is). Bitcoin is created by solving increasingly complex computational problems, with a hard cap of 21M bitcoin to come into existence. It is also trustless – every transaction is recorded on a centralized blockchain, making the monetary system incredibly transparent.There are no fractional reserves, and transactions are final and irreversible. Perhaps most importantly, no one can issue more bitcoin. It is hard capped at21M BTC.
So, what role does bitcoin play in hedging?
At its core, BTC is a hedge against the centralized monetary system and US dollar dominance.
Why would you want to hedge against this? I’m going to show you a few charts that indicate that during the period of high inflation from November 2021 to today, the US monetary system has begun showing signs of stress. The 20 and 30 year bond yields have been steadily moving up for 5years. Part of this is higher long-term inflation expectations, but part of this is also bond investors asking the US Government for more compensation stemming from the fact that there is a large, and growing, budget deficit.
We have also seen action on the gold price - one of the more traditional hedges against inflation and dollarisation.
We have also seen much commentary regarding stocks as an inflation hedge - as their earnings grow, the market perception is that the capital value will capture this nominal growth as well, assuming the underlying companies can pass on inflated input prices to their customers. It is hard to parse what portion of stock growth is truly inflation and truly growth in underlying real terms.
Money supply has grown ~6.9% per annum since 2000. The rate has accelerated since 2023.
Does Bitcoin really hedge?
Historically, yes. There’s a reasonable correlation between Bitcoin price and M2 supply. There are many versions of the below graph, layering in different date on top of the underlying mechanism - we see long periods of very high money supply creation, few periods of minor destruction, and Bitcoin keeping pace and routinely exceeding money supply (with the exception of the last 12 months).
What do I have to believe to purchase bitcoin and expect strong positive returns over the next decade?
One or more of the following things: the more that are true, the higher the forward-looking returns:
- The typical relationship of money supply and bitcoin will hold. Money supply will continue to grow, and private and / or institutional investors will increase their wealth allocation to bitcoin to take advantage of the hedging effect they expect to play out in future.
- Central Banks add bitcoin to their treasuries. Gold has inherent issues in terms of storage, auditing, legitimacy and other practical challenges. No such issue for Bitcoin.
- A country prone to high inflation or currency debasement decide they want a store of value outside their own currency, and outside the traditional monetary system. This has happened before (El Salvador). The model worked for them.
- Agentic AI transactions utilise Bitcoin as a monetary system. AI agents will eventually be asked to transact with each other, without the involvement of a human. Part of this transacting will require a low-cost, peer to peer, trustless, verifiable value exchange system with strong technical notation and large public knowledge repositories so that Agents can utilise the system. The largest and most well documented such system is Bitcoin.
- As the last bitcoin is mined, uptake occurs in market to secure some portion of the network. This is likely institutional money looking to secure some stake.
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There are other bull cases, but these four are the most prevalent among those who consider the market.
There are no guarantees in capital markets - Bitcoin could still fall entirely to the wayside. It cannot be a primary return driver in serious portfolios, but it can be a hedge and a satellite return driver. The future has never been less certain, and unlikely things happen all the time. I have a greater than 50% probability assigned to 2 of the 4 above scenarios playing out
